Meet One of the Biggest Bears on Spain

Bearish on Spain? Don’t worry. MarketBeat is here to tell you: You are not alone.

Jonathan Carmel, portfolio manager at $50 million global macro fund Carmel Asset Management in New York, has been fixated on the Kingdom of Spain for the past year, and over the weekend produced a 54-slide presentation whose apocalyptic tones have captured a fair amount of attention on Wall Street.

The centerpiece of Mr. Carmel’s dire prophecy is that Spain’s housing bubble has yet to really burst. And Spain’s housing bubble, he says, puts the U.S.’s to shame. MarketBeat caught up with him briefly today.

And get this: At the peak of the bubble, Mr. Carmel finds, about one in 22 members of the U.S. workforce worked in the construction industry. At the peak in Spain? One in seven workers.

“Spain is a country where the economy is really built on construction,” Mr. Carmel says. Now, he argues, “Spain’s economy is broken.”

Historically, Spanish housing prices have moved in line with wages, but around 2000, home prices began to soar way out of step with wage growth. After more than doubling between 2002 and 2008, Spain’s home prices have fallen about 20% off their peaks. But Mr. Carmel says home prices need to fall at least another 35% (and probably closer to 50%) for them to come back in line with wages. Even after the recent declines in home prices, Spanish housing is still more expensive than the U.S. at its bubble peak in 2006.